Tether is not under investigation for pumping Bitcoin but is still entangled in a fraudulent reserves backing USDT question
It can be said that Tether is unlikely to be investigated by the New York Attorney General (NYAG) for alleged “pumping bitcoin”, “printing fake dollars” or “security status”. However, that is another story. By the fraud committed by making untrue claims about reserves backing tether and their ability to honor customer withdrawal requests.
More specifically, Tether is accused of using co-mingled client funds, losing $850 million of co-mingled client and corporate funds in 2018 (which lead to tether not being fully backed by cash reserves), and keeping this information from the public.
— Alex Krüger (@krugermacro) January 8, 2021
Tether is not under investigation for pumping Bitcoin but is still entangled with a fraudulent reserve backing the USDT
As you know, Tether is accused of using co-mingled client funds, losing $ 850 million of the co-mingled client and corporate funds in 2018 (which lead to tether not being fully backed by cash reserves), and keeping this information from the public.
According to the economist cum cryptocurrency trader Alex Krüger, Tether is under investigation for fraud under the Martin Act, which authorizes the Attorney General to investigate securities or commodities fraud within or from New York.
The NYAG argues Tethers are a commodity.
“I’d be very surprised if this investigation leads to USDT getting delisted US exchanges. Seems that it is more about control, information, and fines both against the company and management.”
Moreover, the banks will not go out of business when they break the law. They get slapped a big fine, are ordered to get their act together or suffer further consequences, and life goes on.
In the unlikely scenario, this leads to a run on USDT, would expect a very brief BTC crash followed by a slingshot upwards motion as everybody dumps USDT for the solace of Bitcoin. That slingshot would run over every single stop out there. DeFi on the other hand would suffer.
Tethers in circulation have grown tenfold since April 2019, when tethers were backed by 75% in currency and cash equivalents due to the “hole” caused by seized assets. It would thus be reasonable to expect USDT now 97% backed, making a run on tether unlikely to succeed.
The real question should be, why do you care so much about something that has no market impact? The best to leave Tether to prosecutors and Tether and focus on things that make the number go up or down.
- The Tether Treasury Has Minted Almost Half A Billion New USDT And Distributed More Than 185 Million USDT To Exchanges
- Unregulated Stablecoins Such As Tether Face Increasing Regulatory Pressure From The U.S. Government